Disney buying 'Star Wars' maker Lucasfilm

Disney buying 'Star Wars' maker Lucasfilm for $4.05 billion
Brandon Bailey
bbailey@mercurynews.com
10/30/2012
http://www.mercurynews.com/movies-dvd/ci_21891588/disney-lucasfilm-buying-star-wars-maker-george-lucas

Vowing to breathe new life into filmmaker George Lucas's beloved "Star Wars" franchise, The Walt Disney Co. said Tuesday that it will pay $4.05 billion to buy San Francisco-based Lucasfilm and the rights to produce future installments in one of the world's most lucrative film sagas.

Disney CEO Robert Iger, who called the series "one of the greatest family entertainment franchises of all time," said his company plans to release the first of at least three more "Star Wars" films in 2015, with an additional sequel coming every two to three years after that.

Lucas had previously said he would make no more "Star Wars" films, and he recently announced plans to ease into retirement after naming a successor to run his production company. Disney said he will serve as "creative consultant" on the upcoming films.

"I've always believed that 'Star Wars' could live beyond me, and I thought it was important to set up the transition during my lifetime," the 68-year-old film pioneer said in a statement released by both companies.

The deal will add to Burbank-based Disney's already significant presence in the Bay Area, where the media conglomerate also owns Emeryville-based Pixar Studios -- itself an early spinoff from Lucas' company. Disney said it has no plans to move employees of Lucasfilm or its subsidiaries, including the celebrated special-effects division known as Industrial Light & Magic, from their current locations.

Lucasfilm has been headquartered at San Francisco's Letterman Digital Arts Center since 2005, but the company also has operations in Singapore and at two campuses in Marin County, where Lucas moved from Hollywood to the property he renamed Skywalker Ranch in 1978.

The privately held Lucasfilm employed about 1,700 people as of last year, according to an analysis by the research firm PrivCo, which estimates it had $1.5 billion in revenue in 2011.

In addition to new films, Disney plans to create new toys, consumer products, TV spinoffs and theme park tie-ins from the "Star Wars" series, which the company will add to a growing stable of iconic characters that already includes Disney's Snow White and the Little Mermaid, Pixar's Buzz Lightyear and Nemo, and Marvel's Iron Man and the Mighty Thor.

"If you look at the films that work these days, it's these big-branded characters that do really well," said Michael Corty, who follows Disney for Morningstar. "So this is in their wheelhouse."

Lucas also produced such hits as the Indiana Jones films starring Harrison Ford, but Iger told analysts Tuesday that Paramount has certain rights to that series that make it unlikely Disney would seek to revive it.

"We're going to concentrate on the 'Star Wars' franchise," said Iger, who added that as part of the deal, Disney is acquiring an "extensive and detailed treatment" or story outline for the next three films in the series.

While the later "Star Wars" installments were panned by some critics and fans, the last sequel in the series ranked as the top-grossing film of 2005. "We believe there is substantial pent-up demand" for more installments, Iger told analysts.

The six "Star Wars" feature films produced by Lucas have earned a combined $4.4 billion in box office revenue. Disney Chief Financial Officer Jay Rasulo said he estimated each of the last three films could have averaged $1.5 billion after adjusting for inflation and the increase in potential for revenue from overseas and other sources.

Toys and other products tied to the "Star Wars" brand will bring Lucasfilm about $215 million in revenue this year, Rasulo added, but he said Disney believes it can make even more money in foreign markets and through additional tie-ins at theme parks and elsewhere.

"We like Star Wars' potential on television, as well," Iger told analysts, adding that Disney may create a related series for its new cable channel aimed at boys.

Though best known for its films, Disney is a diverse conglomerate that also owns television networks ESPN and ABC, vacation resorts and retail stores. It reported $1.8 billion in profit for its most recent quarter, up 30 percent from a year earlier.
Some analysts trace the current strength of Disney's film division to its $7.4 billion purchase of Pixar, which was an early spinout from Lucasfilm before it was taken over by Apple (AAPL) co-founder Steve Jobs.

"Their movie business before Pixar was kind of struggling," said Morningstar's Corty. "Disney needed an injection of creativity and Pixar helped with that."

Disney's latest deal will mean additional wealth for Lucas, whose personal fortune was estimated at $3.3 billion by Forbes earlier this year.

As sole owner of Lucasfilm, he will receive slightly more than $2 billion in cash and about $2 billion worth of stock in Disney -- making him the second-largest individual shareholder in the company.

The filmmaker had announced plans to retire earlier this year, when he named veteran producer Kathleen Kennedy as co-chair and his eventual successor as head of Lucasfilm. Disney said Kennedy will now run the operation as a division of Walt Disney Studios.

Lucas had recently abandoned plans to build a new studio on a third Marin property known as Grady Ranch, after neighbors opposed the project. A spokeswoman for Lucas said he will retain ownership of the current Lucasfilm campuses, including the sites in San Francisco and Marin, with the understanding that Lucasfilm will continue operating on the sites.

Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/BrandonBailey.

1971: George Lucas founds company as he releases "THX 1138," his first feature film.
1975: Special-effects studio Industrial Light & Magic and sound-effects company Sprocket Systems, which later becomes Skywalker Sound, founded.
1977: "Star Wars," the first film in a blockbuster trilogy, released.
1978: Lucas purchases 2,500-acre ranch in Marin County that later becomes Skywalker Ranch, home of some of Lucasfilm's production studios.
1979: Lucas hires Ed Catmull to head Lucasfilm's new computer division, which later creates the Pixar Image Computer.
1982: New video game division, Lucasfilm Games, later renamed LucasArts, launched.
1983: THX division, focusing on in-theater sound, founded.
1984: Computer division, using new Pixar Image Computer, releases first short film, which featured contributions from John Lasseter.
1985: Lucasfilm moves to Skywalker Ranch.
1986: Lucas sells Pixar to Steve Jobs.
1997: Original "Star Wars" trilogy re-released.
1999: Release of "Star Wars: The Phantom Menace," kicking off new trilogy.
2003: Lucasfilm Animation established.
2005: Lucasfilm moves into new offices in the former Presidio military base in San Francisco.
2006: Disney buys Pixar from Jobs.
2008: "Star Wars: The Clone Wars," first full-length animated film, released. TV series of the same name debuts.
2012: Disney buys Lucasfilm.
Source: Lucasfilm, Pixar, staff research